Oracle says Eskom must pay up, as utility warns of 'catastrophic consequences' of loss of support

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Power lines feed electricity to the national grid from Koeberg Nuclear Power Station. (Photo by: Education Images/UIG via Getty Images)
Power lines feed electricity to the national grid from Koeberg Nuclear Power Station. (Photo by: Education Images/UIG via Getty Images)
  • Eskom and Oracle are involved in a multi-million-rand contractual dispute over the alleged underpayment of IT support services.
  • The power utility has warned of "catastrophic consequences" if the US tech giant fails to renew the provision of services, including systems that control electricity grids, allowing areas to be switched off during load shedding. 
  • An Eskom court application to compel Oracle to continue providing services was dismissed last week, and the utility says that it has invoked contingency plans.  

Business software giant Oracle has said Eskom should "pay the pending dues for the Oracle software that they use", after the power utility last week lost a court application to compel the US corporation to renew its support services until April 2022. 

Oracle provides a range of IT services, which the struggling utility in court papers described as "quite essential to some of Eskom's crucial operations".

The services are provided under a five-year master agreement which started in 2017 and has been renewed annually. Some of the tools that Oracle provides include:  

  • Eskom's online vending system, which enables the sale of electricity to users.
  • Maintenance tools for power outages.
  • Tools for the logging of electricity fault.
  • Control of electricity grids, which allow areas to be switched off.
  • Load monitoring of electricity generation power stations. But a contractual dispute over alleged underpayment led Oracle to threaten to stop providing these services. 

While Eskom has said that it has processes in place to reduce the risk of its operations being disrupted, in court filings, it also argued that if Oracle withdraws its services, it may not be able to fulfil its obligation to supply electricity. 

Withdrawing the services would have "catastrophic consequences," Eskom's chief IT advisor Tshifhiwa Ratshimbilani said in an affidavit. 

"In essence, Oracle is attempting to hold Eskom ransom by in effect refusing to provide Eskom with technical support services that Eskom requires so as to extort payment of monies which Eskom disputes it is owing." 

Allegations of underpayment 

The case background is set out in Eskom's court application, which notes that the US tech giant in 2019 conducted an audit of Eskom's use of its products. 

It apparently found that Eskom has been overusing its products and should pay more. Oracle did not reply to a request to explain the nature of the dispute. 

Eskom has denied the allegation of overuse and has questioned the audit's findings. 

In November last year Eskom's group CEO André de Ruyter wrote a letter to Oracle's head for Europe, Middle East and Africa, stating that while it was clear that a "sharp dispute" over payments had arisen, Eskom did not accept that it had to be "resolved on Oracle's terms". 

The dispute ought to be resolved by "international best practices" and not by "threats", said De Ruyter. 

The CEO's letter states that Oracle's original claim against the power utility was for a sum of R7.3 billion, which was later reduced to R600 million and then R400 million. 

"The regional and national offices appear to believe that by flexing Oracle's muscles, they are displaying strength. This is not how disputes of this nature ought to be resolved," he said.  

According to Eskom, the letter led to a virtual meeting between top Eskom and Oracle management, which did not resolve the impasse. 

Eskom contends that it owes the business software giant R166 million, which it is ready and willing to pay. 

De Ruyter has proposed that it pay this initial amount while a court determines whether it owes more. But the two sides could not reach an agreement. 

Application dismissed 

On 5 March, Eskom said it received a letter from Oracle in which the tech firm said it intended to stop providing IT services from April.

This led the utility to approach the Johannesburg High Court with an urgent application to compel Oracle to keep providing services. But the application was dismissed last week.

Eskom has said that it intends to launch an application for leave to appeal.

For the moment, it appears that Oracle may still be providing IT services despite a threat to pull support from the beginning of April.

"Oracle have threatened to withdraw their technical services support, and Eskom has invoked its contingency plans," reiterated Eskom's spokesperson Sikonathi Mantshantsha on Wednesday morning. 

Oracle did not immediately responded to a request for comment about the status of the services. 

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